Tag: t_rent4good

long-term lease spread; sustainability

usReit as initial form@ U.S.lease_spread

Posted on by tiger40490

Lease-spread has 2 legs. The income leg is based on leasing my property, which could be Reits.

The more sunshine it gets, the faster this seed grows into a full fledged plan.

Q: What if I build up a 300k Reit portfolio to generate 5% dividend [i.e. 15k/Y] and remain a renter indefinitely? When time is right, I can incrementally liquidate it to buy a rental property.

Ignoring “external” rental incomes (other housing units) but considering subletting, what’s my expected net rent outlay? $2k/M or $24k/Y. At 6% DYOC, a 400k Reit portfolio would take care of this outlay.

For the same amount of capital, how does this portfolio compared to 43R or my Asia rental properties? Fundamentally different assets but still comparable.

  • benefit: no lock-down to one location
  • benefit: incremental acquisition/liquidation
  • benefit: diversification. Lower location-specific risk
  • benefit: liquidity
  • benefit: transaction fee very good when I buy or sell
  • drawback: NRY is less deterministic than rental property
  • drawback: NRY (net) is probably much lower than 43R

— #1 drawback: no windfall appreciation. No ownership of a rental property. See https://tanbinvest.dreamhosters.com/wp-admin/post.php?post=11629&action=edit

As Brian@RTS pointed out, in most U.S. locations inflation-adjusted appreciation is insignificant. However, JC and other parts of NJ might be exceptions.

— active management legwork and emotional costs of delinquency, repairs, vacancy .. is not reflected in my rental yield. I am willing to pay the Reit operator to handle them. Reit management fee is higher than ETF, but not always disclosed.

—-

Need to reduce the mReits , and limit myself to old-fashioned lease operations. I think equity-Reit is similar to that.

[20]stay rented forever]Jersey City #livelihood

Posted on by tiger40490

JC offers plenty of contract jobs + acceptable housing choices. I heard that most parts of JC is not as expensive as waterfront districts (resembles Central Park districts conceptually). I lived in Grove St area for a while. I know Bayonne better:) I cycled through many parts of JC/Bayonne several times.

Good Connectivity (PATH) to top 3 contract job hubs — Midtown + Downtown + JC

School district? I think there is a small part in JC with a good school district. The area is likely too expensive to buy and featuring very poor rental yield. Therefore renting is better than owning.

— livelihood (burn rate + commute tCost)
If rental too high, then consider a smaller, older home further away from waterfront, or Bayonne. They are presumably unpopular among the affluent families or couples. For this reason, affordability is hopefully better.

With car cost savings and time saved on commute, my livelihood pressure could be greatly relieved. After we experience it for a few years, I might want to rent a bigger home, thanks to flexibility of renting.

loc: 1st bet: family rental home^rental property

Posted on by tiger40490

This blogpost is about choosing the location of AA) first family rental home BB) first rental property (lease spread). AA is more important but both decisions influence each other.

Timeline? My family may stay in this municipality if not this neighborhood for 12-36M. Note my kids won’t want to move school too often.

Therefore, I call it a bet. Once you place your bet you can’t always back out without a cost.

Default choice for AA is JC/Bayonne/Hob. Feasibility due diligence is the first priority in the analysis

  • SDXQ, CC2, clean street, parks,
  • car-dependency .. important in my first 6M. JC downtown is excellent
  • affordable rent with sublease .. Bayonne is low-rent, so is the the old JC, but downtown JC may enjoy better sublease demand.

— The BB decision is more complicated than AA. Bigger commitment. For the first buy, better buy small and buy in familiar locations.

(To reduce the commitment, REIT lease spread is an innovative idea.)

Ideally, the place should be acceptable as my family home. If rental demand is lower, my family can live there.

overpriced property market: homeOwnership,sdxq..

Posted on by tiger40490

In overpriced markets like Beijing, rental is relatively underpriced and represents a real bargain. However the Chinese doesn’t perceive the bargin in a positive light, due to a deep, long-held preference for ownership, as an essential basis of security, achievement, social status.

I feel it’s an irrational bias, although I could be biased.

How about sdxq homes? Poor bargain in terms of rental demand and commute

How about Ivy League colleges and UChicago? Poor bargain, according to Kyle.

In all of these cases, mainstream preference is NOT an accurate reflection of the correct priority in my situation. It’s crucial to honor my own preference (and wife’s) rather than other people’s preferences.

earn^ pay-rent ^ pay-mtg

Posted on by tiger40490

U.S. gross rental yield is usually higher than Singapore, for a comparable location. Therefore, compared to China or Singapore, it’s more important for U.S. residents to earn rental and avoid paying rental. When you rent out, the pTax burden is transferred to tenants.

I have always believed that “mortgage expenses are investment-like but rent expenses go down the drain”. This is esp. true in a (gradually) rising market.

Imagine you pay mtg interest just to hold the property, with only 5% of your monthly payment going towards 0.1% of the principal, and you rent out the home? This payment is similar to pTax. Virtually you are paying a rent to hold the asset hoping to benefit from appreciation and rental income.

How about a co-op, assuming sublet freedom? The coop HOA is just like the “rent” I described above

owner-occupy^lease-spread #Jack.He #lease3spread

Posted on by tiger40490

https://tanbinvest.dreamhosters.com/2017/03/08/sell-a-unit-to-finance-u-s-home-purchase/ is the opposite suggestion.

My friend Jack He gave an unconventional tip about lease spread: “Buy your 1st property as investment, and don’t need to think so much about how suitable it is as a family home. Better rent a family home.” I replied “Yes, when we live in the city for a while, and figure out what we want, we can then buy a long-term home.”  Jack pointed out that if you rent, you can move very easily. When your kids go to high school, you can simply pack up and move with them. However, look at the various risks in ##U.S.home buy:don’t rush #sticky. In the scenario of disappointing rental income, it would be much better if my family can use the home. Therefore, to play safe I can’t follow Jack’s unconventional tip.

In reality my wife is unlikely to choose that. The practical benefits of staying in our own home are overwhelming:

  • can renovate the way we want __but__ DIY is painful
  • can buy nice furniture
  • tax rebate. Assuming 25% marginal tax rate, a $1k mortgage interest (not the full installment) you pay could save $250 on tax.
  • Some pTax amounts are also deductible from your income tax? See https://turbotax.intuit.com/tax-tools/tax-tips/Home-Ownership/Claiming-Property-Taxes-on-Your-Tax-Return/INF29463.html
  • some sense of ownership and security __but__ my (4+) overseas properties already provides it.
  • — Jersey City realtor Zak wrote 8 reasons to give up renting. Here are some of his pointers —
  • lower cost-variability than renting over longer horizon, assuming you take a fixed-rate mortgage. no worry about rent increase, lease termination etc __but__ the stability also ties you down

Many non-Chinese families really prefer renting indefinitely, with benefits:

  • can minimize commute
  • no tie-down, as Jack He said
  • no maintenance burden
  • no DIY home improvement dilemma
  • sublease, if your property is too big
  • less worry about bad neighbors
  • no worry about damage to the property
  • no risk of unexpected poor liquidity… hard to sell
  • easy move when you find out the neighborhood is dirty, has drugs …
  • easy move when you find out the daily commute is too long
  • when your kids graduate to a higher-level school ..
  • If you don’t like the school ..
  • If mom or dad gets a new job ..

Sugg #1: As a first milestone, buy a rental property for rental income, and stay rented with family indefinitely (perhaps with a sublease tenant[3]). Jack He felt this is a good idea. To maximize rental yield, consider 43 Rockledge hotel model

Sugg #2 : buy a smaller home for the family, and stay alone rented near office half the days for a few months, just like John, Shanyou, Alok and Deepak did at RTS

[3] lease3spread .. involves 3 rental _payments_

rental prop family sub-tenant
             2FH
typical $2000 -$3000 $1000
payer – me –
receiver me – me
owner me – –